Mr. Smith borrowed 31000 to purchase stock for his baseball card shop. He repaid the simple interest loan after three years. He paid interest of 8500. What was the interest rate?
To find the interest rate, use the formula below where R is the rate, I is the interest paid, P is the principal, and T is the time.
Interest is the price paid for using the money. Identify the interest.
I = 8500
Principal is the amount of money borrowed or invested. Identify the principal.
P = 31000
Time is the number of days, months, or years that the money is borrowed or invested.
Identify the time.
T = 3 years
Substitute values determined above for I, P, and T in the simple interest formula.
Multiply the denominator.
Simplify the expression, rounding to two decimal places.
Therefore, the interest rate was 0.09 or 9% per year.